Klobuchar Opening Remarks at Antitrust Subcommittee Hearing on Consolidation

WASHINGTON—U.S. Senator Amy Klobuchar (D-MN), Chairwoman of the Senate Judiciary Subcommittee on Competition Policy, Antitrust, and Consumer Rights, held a hearing titled “Strengthening U.S. Economic Leadership: The Role of Competition in Enhancing Economic Resiliency.” The hearing focused on the dangers of consolidation, especially in critical supply chains, which can make the economy vulnerable to disruptions and supply shortages that can endanger U.S. economic resiliency and national security. 

“Over 75% of U.S. industries have become more concentrated since the late 1990s. Since 2008, American firms have engaged in more than $10 trillion in acquisitions [...]. We see this consolidation in everything from ticketing to cat food to caskets. High levels of consolidation are almost never good. It often leads to fewer choices, higher prices, and less innovation,” said Klobuchar. “But consolidation in our economy doesn't just add to the cost of a concert ticket or the latest iPhone. It also weakens our nation's economic resiliency.” 

Last month, Klobuchar reintroduced the Competition and Antitrust Law Enforcement Reform Act to reinvigorate America’s antitrust laws and restore competition to American markets. This legislation will give federal enforcers the resources they need to do their jobs, strengthen prohibitions on anticompetitive conduct and mergers, and make additional reforms to improve enforcement.

A rough transcript of Klobuchar’s full opening statement is available below and you can download the video here. 

Senator Klobuchar: I call to order this hearing of the Subcommittee on Competition, Policy, Antitrust, and Consumer Rights on the role of competition in enhancing economic resiliency. I'd like to welcome our witnesses and thank Ranking Member Lee and his staff for helping to plan this hearing. 

Over 75% of U.S. industries have become more concentrated since the late 1990s. Since 2008, American firms have engaged in more than $10 trillion in acquisitions—that's “trillion” with a “T.” We see this consolidation in everything from ticketing to cat food to caskets. 

High levels of consolidation are almost never good. It often leads to fewer choices, higher prices, and less innovation. But consolidation in our economy doesn't just add to the cost of a concert ticket or the latest iPhone. It also weakens our nation's economic resiliency. 

When just a handful of companies control our supply chains, our entire system becomes susceptible to disruptions that can put our economy and even our national security at risk. 

Over the last decade, we've seen real-world consequences that consolidation within supply chains, what they can do to Americans. Let me give you a few examples. 

Medical supplies. The production of generic prescription drugs, which the FDA estimated saved Americans more than 53 billion from 2018 to 2020 alone are reliant on tenuous supply chains that leave little room for error and can result in shortages when errors do occur. Fully one-third of active ingredients necessary for cost-effective generic drugs are manufactured in a single facility almost always located overseas, with no backup; only 14% of active ingredients used for domestic generic drugs are manufactured in the United States. 

Another example, after Hurricane Maria hit Puerto Rico in 2017, the US faced a shortage of IV bags because one company had consolidated the majority of IV bag production into a single facility on the island. Stop and think about that. There was a shortage of plastic bags filled with saltwater on an island because the market had become so consolidated. 

Consolidation in supply chains can also create tempting targets for cybercriminals as we now know well. For example, this winter cybercriminals broke into the Change Healthcare network owned by UnitedHealth Group, and they stole data, demanded ransom, and forced more than one hundred, one hundred, electronic systems vital to the US healthcare system to be shut down. 

Of course, a ransomware attack is disastrous for any firm, but its consequences were far more widespread because of Change Healthcare's position in the healthcare supply chain. Change Healthcare processes more than 15 billion transactions and accounts for 1.5 trillion in healthcare claims each year. It also touches at least a third of U.S. patient records. As such health care providers depend on one company to file insurance claims and receive payment. When those systems failed, doctors and hospitals could no longer get paid and especially those with no backup, putting many small practices at risk of going out of business and some patients were unable to get the medical care that they needed.

Another example, today, less than 10% of semiconductor chips are currently manufactured domestically compared to 37% in the 1990s. As a result of outsourcing and consolidation, most of the world's advanced semiconductors are manufactured by a single company, creating an especially vulnerable chokepoint. Consumers felt the dire effects of chip shortages during the pandemic from cars to refrigerators and it cost the US economy what is estimated to be over $200 billion in a single year. 

This of course led us to pass the CHIPS and Science Act, which makes landmark investments to increase domestic semiconductor production by building, expanding, and modernizing state-of-the-art manufacturing facilities here in the US, including a $120 million investment to boost manufacturing at Polar Semiconductor in Bloomington, Minnesota, which will now be the only domestic manufacturer of the kind of chips that they make. 

Now solutions. These examples raise a simple question, do we want to be a country where markets are dominated by a few giants and where manufacturing is so consolidated, that our supply chains and entire sectors of our economy are at risk? Or do we want an economy where competitive markets drive growth, innovation, and resilience where small independent businesses as well as larger corporations can coexist, and an economy where supply chains are diverse enough and strong enough to ensure that consumers have access to the best products? 

I think it is an obvious choice. It is one of the reasons that we have been trying to keep up with the times. Over the years, Congress first passed the Sherman Act and then updated the laws as new challenges came along. That has not happened yet. There's a lot of good ideas out there. One of them is the Competition and Antitrust Law Enforcement Reform Act that I lead. The bill would update the Clayton Act to stop harmful consolidation including by shifting the legal burden in some cases, in the mega-merger cases, to merging parties to simply prove not that it'll even enhance competition, but that the merger won't hurt competition. 

This bill would also allow antitrust enforcers to take a closer look at the efficiencies that companies may claim justify a merger. Often, so-called efficiencies are really just cost-cutting measures that strip out investments in supply chain protections. 

Our enforcement agencies also need the resources they must have to fully enforce America's antitrust laws at a time where these companies have gotten larger and larger and larger, at a time where the issues become more and more complex. It's one of the reasons that Senator Lee and I joined forces. I had a bill with Senator Grassley and the merger fees to update how they are charged, less fees for small mergers, bigger ones for big. And then Senator Lee had a venue bill involving state enforcement supported by every attorney general in the country. And we were able to join forces and get this through as an amendment at the end of 2022. 

So that is the two things I look at right now. Just generically, we can look at industry by industry, certainly pharma, certainly tech, certainly healthcare but when you look at the big picture, you look at one the antitrust enforcers have to have the resources they need to do their jobs. And two, we need to look at some changes, reforms to our laws, so they fit the world that we live in, not the world that we lived in 100 years ago. 

So with that, I turn it over to my colleague, Senator Lee. Thank you. 

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